Ayesha Saba

Pakistan’s real estate industry, which contributes significantly to the GDP and job creation, is facing a slowdown, forcing many real estate developers and investors to invest in the United Arab Emirates (UAE), reports WealthPK.

The increasing flight of capital is due to economic instability, inconsistent policies, and burdensome tax in the country. Experts say if these trends persist, Pakistan risks losing the crucial investment momentum in a sector that has long been considered a driver of growth and employment.

Talking with WealthPK, Asad Mehmood, a tax consultant for property developers, said there has been a visible uptick in the number of Pakistani developers registering businesses in Dubai, Abu Dhabi, and Sharjah. This is primarily driven by the ease of doing business, investor-friendly tax policies, and predictability of regulatory frameworks in the UAE, he explained. In the last two federal budgets, the government introduced higher capital gains tax, increased withholding tax, and tightened documentation requirements. While these measures were aimed at broadening the tax net and curbing black money, they have unintentionally driven investors away.

 “The intent of tax reforms is valid, but the implementation has been harsh and without consultation. Developers feel squeezed. They are not just being taxed more; they are being taxed unpredictably. This lack of clarity adds to the cost of doing business and undermines confidence,” Asad said. Meanwhile, the UAE offers a sharp contrast. The country has emerged as a safe haven for South Asian investors, including Pakistanis, with initiatives like long-term residency visas, zero personal income tax, and streamlined company formation procedures.

“Dubai’s real estate market is transparent, well-regulated, and internationally integrated. Pakistani developers see not only better returns but also fewer compliance headaches,” he stated. This shifting trend carries long-term implications. If high-net-worth individuals and construction firms continue to exit Pakistan’s real estate sector, it could stall urban development, reduce employment in construction-linked industries, and lower future tax revenues. Moreover, it could delay the government's broader plans to increase housing supply and bridge the urban housing deficit. He recommended revisiting the taxation policy to strike a balance between revenue collection and investment incentives.

“We need stability, predictability, and a regulatory environment that encourages local capital to stay. Otherwise, Pakistan will continue to export not just its wealth, but its potential as well for economic recovery.” Pakistani investors are making a strong impact on Dubai’s real estate sector, moving up to the fifth place among top foreign buyers, according to a report by Betterhomes. Last year, they were ranked seventh. The report shows that Indian nationals remain the largest group of buyers, followed by British investors. Russian buyers, previously in third place, have now fallen to ninth, while Turkish investors have taken the tenth spot.

Credit: INP-WealthPk